I feel no fear and no pain. Is now the time to reallocate more toward equity?

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Dolcetto
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I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 12:44 pm

I've been managing my investments in a three fund portfolio for about five years. I was in the market for about three years before that holding only a target date fund. The portfolio that I decided upon early on is the following:

50% - Vanguard Total Stock Market Index (VTSMX/VTSAX)
30% - Vanguard Total International Stock Index (VGTSX/VTIAX)
20% - Vanguard Total Bond Market Index (VBMFX/VBTLX)

As the stock markets have fallen recently by almost a third, I've felt no pain or fear about the losses in my retirement accounts. Actually, I'm excited to rebalance on Monday by buying more stocks! I'm in my mid-thirties and have a retirement horizon of 20-30 years. Back when I decided on this allocation, I thought it was a bit conservative, but took to heart advice that said, essentially, that I shouldn't trust myself not to panic if the markets were to fall by a third. Well, they have, and I'm fine.

I'm thinking of rebalancing to:

60% - Vanguard Total Stock Market Index (VTSMX/VTSAX)
30% - Vanguard Total International Stock Index (VGTSX/VTIAX)
10% - Vanguard Total Bond Market Index (VBMFX/VBTLX)

I understand that this also reduces my international/domestic equities ratio, but it maintains round numbers and I'm actually happier with the slightly lower international allocation.

Thoughts? Criticisms? Is this "market timing?"

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by retired@50 » Sun Mar 22, 2020 12:51 pm

What you propose isn't re-balancing, it's re-allocating.

You're making a fundamental change to the percentage you hold in bonds by cutting it in half.

Either your original plan (80/20) didn't truly reflect your desires and goals, or the new plan doesn't. This appears to be the behavior of an opportunistic market timer. If it were me, I wouldn't do it.

Regards,
This is one person's opinion. Nothing more.

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by MotoTrojan » Sun Mar 22, 2020 12:54 pm

retired@50 wrote:
Sun Mar 22, 2020 12:51 pm
This appears to be the behavior of an opportunistic market timer. If it were me, I wouldn't do it.
If the OP determined via actual experience that their original AA was too conservative, then perhaps not.

OP I see no major issues with it. Maybe split the difference and start out with a reduction to 15% bonds and if the market falls further and you feel A-okay, then make the full shift and stay for good.

Topic Author
Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 12:55 pm

retired@50 wrote:
Sun Mar 22, 2020 12:51 pm
What you propose isn't re-balancing, it's re-allocating.

You're making a fundamental change to the percentage you hold in bonds by cutting it in half.

Either your original plan (80/20) didn't truly reflect your desires and goals, or the new plan doesn't. This appears to be the behavior of an opportunistic market timer. If it were me, I wouldn't do it.

Regards,
Thank you for your thoughts. I understand the difference between the terms and used the correct one in the title, but made a mistake in the body. Yes, I am contemplating reallocating now that I realize I am very comfortable with what has happened in the markets recently.

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Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 1:01 pm

MotoTrojan wrote:
Sun Mar 22, 2020 12:54 pm
retired@50 wrote:
Sun Mar 22, 2020 12:51 pm
This appears to be the behavior of an opportunistic market timer. If it were me, I wouldn't do it.
If the OP determined via actual experience that their original AA was too conservative, then perhaps not.

OP I see no major issues with it. Maybe split the difference and start out with a reduction to 15% bonds and if the market falls further and you feel A-okay, then make the full shift and stay for good.
Thanks. That's what I'm thinking. I want to do it Monday shortly before 4:00 PM so need to make a quick decision. I've had reservations about the 20% bond allocation since the beginning, but wanted to err on the side of caution. Now that I know I'm totally fine, I think 10% is the way to go. Probably move back to 20% at about age 40 is what I'm thinking.

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by livesoft » Sun Mar 22, 2020 1:05 pm

What is your current allocation now? Not your desired allocation, but your ACTUAL allocation? Did bonds go to 25%? 30%? B%??
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Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 1:13 pm

livesoft wrote:
Sun Mar 22, 2020 1:05 pm
What is your current allocation now? Not your desired allocation, but your ACTUAL allocation? Did bonds go to 25%? 30%? B%??
Thank you for the question. I got really lucky and rebalanced by selling stock to buy bonds at right around the peak on February 20. Currently I am at about 27%/73% bond/stock. I would have rebalanced/reallocated at 25% bonds, but had to wait due to the frequent trading policy.

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by livesoft » Sun Mar 22, 2020 1:23 pm

There are many rebalancing studies that come to the conclusion that rebalancing more frequently doesn't increase portfolio performance. But performance is not necessarily a reason to rebalance. Many say maintaining desired risk level is a reason to rebalancing.

So you can look and check the asset allocation of your portfolio as often as you want to when it comes to rebalancing, but rebalancing based on any calendar date or time interval just doesn't make any sense to me. One should rebalance when their AA varies too much from their desired AA. The problem is then deciding what is "too much."

If you have 27% bonds now and want to go to 10% bonds, then at the current time I would suggest moving in steps of 5% to 10%: 27 -> 22 > 17 -> 12 -> 10 over the course of weeks. I would make the change on days that equities drop significantly or set a one or two month time limit. I can say that right now a 5% one-day drop in equities in not significant anymore and could be considered normal. I think the US total stock market would have to drop more than about 6% in a single day for it to be significant nowadays because there have been a few larger drops recently.

So look often, but act rarely. This will minimize regret.
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by vineviz » Sun Mar 22, 2020 1:41 pm

Dolcetto wrote:
Sun Mar 22, 2020 1:01 pm
MotoTrojan wrote:
Sun Mar 22, 2020 12:54 pm
retired@50 wrote:
Sun Mar 22, 2020 12:51 pm
This appears to be the behavior of an opportunistic market timer. If it were me, I wouldn't do it.
If the OP determined via actual experience that their original AA was too conservative, then perhaps not.

OP I see no major issues with it. Maybe split the difference and start out with a reduction to 15% bonds and if the market falls further and you feel A-okay, then make the full shift and stay for good.
Thanks. That's what I'm thinking. I want to do it Monday shortly before 4:00 PM so need to make a quick decision. I've had reservations about the 20% bond allocation since the beginning, but wanted to err on the side of caution. Now that I know I'm totally fine, I think 10% is the way to go. Probably move back to 20% at about age 40 is what I'm thinking.
I’m with MotoTrojan on this. Sounds like you were slightly too conservative at the beginning, and now you have new information about your risk appetite. Make the change.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 1:44 pm

livesoft wrote:
Sun Mar 22, 2020 1:23 pm
There are many rebalancing studies that come to the conclusion that rebalancing more frequently doesn't increase portfolio performance. But performance is not necessarily a reason to rebalance. Many say maintaining desired risk level is a reason to rebalancing.

So you can look and check the asset allocation of your portfolio as often as you want to when it comes to rebalancing, but rebalancing based on any calendar date or time interval just doesn't make any sense to me. One should rebalance when their AA varies too much from their desired AA. The problem is then deciding what is "too much."

If you have 27% bonds now and want to go to 10% bonds, then at the current time I would suggest moving in steps of 5% to 10%: 27 -> 22 > 17 -> 12 -> 10 over the course of weeks. I would make the change on days that equities drop significantly or set a one or two month time limit. I can say that right now a 5% one-day drop in equities in not significant anymore and could be considered normal. I think the US total stock market would have to drop more than about 6% in a single day for it to be significant nowadays because there have been a few larger drops recently.

So look often, but act rarely. This will minimize regret.
Last month is the first time that I had to trade to rebalance. In the past I have always rebalanced with contributions. Although I had never had to rebalance by trading, my policy has always been to rebalance by trading at about 5% from my target. Although I hit the 5% mark some time ago, I wasn't able to rebalance because I had to wait 30 days since I sold shares of both of my equity funds due to their frequent trading policies.

Your idea of not jumping from a 20% target allocation right to 10%, but instead taking smaller steps is interesting. The idea of making a single jump, however, is appealing to me because it is easier and more convenient. I'm not concerned about potentially regretting the move because I am not making the move to take advantage of the drop in the stock market drop, I am making the move because the drop has tested me and now I know that I can handle a lower bond allocation.

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Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 1:47 pm

vineviz wrote:
Sun Mar 22, 2020 1:41 pm
Dolcetto wrote:
Sun Mar 22, 2020 1:01 pm
MotoTrojan wrote:
Sun Mar 22, 2020 12:54 pm
retired@50 wrote:
Sun Mar 22, 2020 12:51 pm
This appears to be the behavior of an opportunistic market timer. If it were me, I wouldn't do it.
If the OP determined via actual experience that their original AA was too conservative, then perhaps not.

OP I see no major issues with it. Maybe split the difference and start out with a reduction to 15% bonds and if the market falls further and you feel A-okay, then make the full shift and stay for good.
Thanks. That's what I'm thinking. I want to do it Monday shortly before 4:00 PM so need to make a quick decision. I've had reservations about the 20% bond allocation since the beginning, but wanted to err on the side of caution. Now that I know I'm totally fine, I think 10% is the way to go. Probably move back to 20% at about age 40 is what I'm thinking.
I’m with MotoTrojan on this. Sounds like you were slightly too conservative at the beginning, and now you have new information about your risk appetite. Make the change.
Thanks for your input. The more I consider each response for or against, the more I think that dropping to 10% bonds until I'm about age 40 is the right move.

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by livesoft » Sun Mar 22, 2020 1:55 pm

Dolcetto wrote:
Sun Mar 22, 2020 1:44 pm
Last month is the first time that I had to trade to rebalance. In the past I have always rebalanced with contributions. Although I had never had to rebalance by trading, my policy has always been to rebalance by trading at about 5% from my target. Although I hit the 5% mark some time ago, I wasn't able to rebalance because I had to wait 30 days since I sold shares of both of my equity funds due to their frequent trading policies.

Your idea of not jumping from a 20% target allocation right to 10%, but instead taking smaller steps is interesting. The idea of making a single jump, however, is appealing to me because it is easier and more convenient. I'm not concerned about potentially regretting the move because I am not making the move to take advantage of the drop in the stock market drop, I am making the move because the drop has tested me and now I know that I can handle a lower bond allocation.
If this was at Vanguard, then the frequent trading policy is trivially circumvented by setting up an automated (that is, scheduled) one-time transaction. This idea is well-known here on the forum and I have used it myself.

While I suggested a way to avoid regret, if you have no regret, then just do it all at once. At some point you might have regret and do things differently in the future, but that is for you to experience which doesn't bother me at all.
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by mookie » Sun Mar 22, 2020 1:55 pm

I have been deliberating the same question as in your original post. My conclusion is that if you are comfortable with the new asset allocation and you don't need the money in your portfolio any time soon, then now is a good time to make the switch. I would do it in a stepwise approach as livesoft suggests, although I would set certain days to do it, so that you don't compulsively watch the market.

The other question is do you plan to go back to your original asset allocation (i.e. shift back to bonds) at equity peaks? That would be a form of market timing, but I have seen it described in other threads, though with no data analyzing its outcomes.

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Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 2:00 pm

livesoft wrote:
Sun Mar 22, 2020 1:55 pm
Dolcetto wrote:
Sun Mar 22, 2020 1:44 pm
Last month is the first time that I had to trade to rebalance. In the past I have always rebalanced with contributions. Although I had never had to rebalance by trading, my policy has always been to rebalance by trading at about 5% from my target. Although I hit the 5% mark some time ago, I wasn't able to rebalance because I had to wait 30 days since I sold shares of both of my equity funds due to their frequent trading policies.

Your idea of not jumping from a 20% target allocation right to 10%, but instead taking smaller steps is interesting. The idea of making a single jump, however, is appealing to me because it is easier and more convenient. I'm not concerned about potentially regretting the move because I am not making the move to take advantage of the drop in the stock market drop, I am making the move because the drop has tested me and now I know that I can handle a lower bond allocation.
If this was at Vanguard, then the frequent trading policy is trivially circumvented by setting up an automated (that is, scheduled) one-time transaction. This idea is well-known here on the forum and I have used it myself.

While I suggested a way to avoid regret, if you have no regret, then just do it all at once. At some point you might have regret and do things differently in the future, but that is for you to experience which doesn't bother me at all.
Thank you. I do really appreciate your original comments.

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Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 2:02 pm

mookie wrote:
Sun Mar 22, 2020 1:55 pm
I have been deliberating the same question as in your original post. My conclusion is that if you are comfortable with the new asset allocation and you don't need the money in your portfolio any time soon, then now is a good time to make the switch. I would do it in a stepwise approach as livesoft suggests, although I would set certain days to do it, so that you don't compulsively watch the market.

The other question is do you plan to go back to your original asset allocation (i.e. shift back to bonds) at equity peaks? That would be a form of market timing, but I have seen it described in other threads, though with no data analyzing its outcomes.
I do plan to go back to my original allocation of 20% bonds eventually, but as part of normal adjustments due to approaching retirement. I intend to move back in 5-10 years around the age of 40.

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Streptococcus » Sun Mar 22, 2020 2:07 pm

livesoft wrote:
Sun Mar 22, 2020 1:23 pm
There are many rebalancing studies that come to the conclusion that rebalancing more frequently doesn't increase portfolio performance. But performance is not necessarily a reason to rebalance. Many say maintaining desired risk level is a reason to rebalancing.

So you can look and check the asset allocation of your portfolio as often as you want to when it comes to rebalancing, but rebalancing based on any calendar date or time interval just doesn't make any sense to me. One should rebalance when their AA varies too much from their desired AA. The problem is then deciding what is "too much."

If you have 27% bonds now and want to go to 10% bonds, then at the current time I would suggest moving in steps of 5% to 10%: 27 -> 22 > 17 -> 12 -> 10 over the course of weeks. I would make the change on days that equities drop significantly or set a one or two month time limit. I can say that right now a 5% one-day drop in equities in not significant anymore and could be considered normal. I think the US total stock market would have to drop more than about 6% in a single day for it to be significant nowadays because there have been a few larger drops recently.

So look often, but act rarely. This will minimize regret.
+1
retired@50 wrote:
Sun Mar 22, 2020 12:51 pm
This appears to be the behavior of an opportunistic market timer. If it were me, I wouldn't do it.

Regards,
-1

The main purpose of a crash is to teach you about your REAL risk tolerance. If in spite of all the instability, panic and losses that we are all going through you feel like taking more risk and amend your AA, then go for it.

People around here like to quote “market timing doesn't work” like it’s a divine rule. Its not. And neither is your IPS. The truth is you cannot consistently time the market and succeed. And you cannot continuously change your IPS and succeed. But There are a few circumstances where you can/should amend your IPS or even time the market. This seems to be one for you. But I would do that over a few weeks, to make sure that you can actually stomach it.

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by retired@50 » Sun Mar 22, 2020 2:34 pm

Dolcetto,
It appears as though I'm in the minority. So be it. It isn't the first time, nor will it be the last.

Based on your OP and subsequent remarks, it appears you intend to hold the higher stock allocation for 5 years or so. I hope it works out.

Regards,
This is one person's opinion. Nothing more.

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Katietsu » Sun Mar 22, 2020 2:41 pm

Surprised that that no one asked you about the bigger picture. Are you as certain as you can be that this money will be invested for the long term? In other words, do you have excellent job security and a solid emergency fund.

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by KEotSK66 » Sun Mar 22, 2020 4:09 pm

i put a set amount into my Roth every month.
my fund is down about 17% which my fund doesn't suffer often, the nav is down to where it was about 8 yrs ago.

i wish i had some cash to exploit these prices, although my dca is exploiting them to a degree.

so you'll get no argument from me about buying stocks, the only ? is how fast/slow do you commit. good luck.
"i just got fluctuated out of $1,500", jerry

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Thesaints » Sun Mar 22, 2020 4:31 pm

Dolcetto wrote:
Sun Mar 22, 2020 12:44 pm
Thoughts? Criticisms? Is this "market timing?"
I don’t think you fully appreciate the situation.

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Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 4:59 pm

Thesaints wrote:
Sun Mar 22, 2020 4:31 pm
Dolcetto wrote:
Sun Mar 22, 2020 12:44 pm
Thoughts? Criticisms? Is this "market timing?"
I don’t think you fully appreciate the situation.
Your comment might be helpful if you explain how or why. The other commenters all made what I thought were reasonable and well thought out critiques. Right now, your comment doesn’t add anything to the discussion.

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Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 5:04 pm

Katietsu wrote:
Sun Mar 22, 2020 2:41 pm
Surprised that that no one asked you about the bigger picture. Are you as certain as you can be that this money will be invested for the long term? In other words, do you have excellent job security and a solid emergency fund.
Thank you for looking beyond the immediate situation. Yes, this money will be invested for the long term. I have in the past taken on credit card debt instead of dipping into retirement accounts and would even go to that extreme again. The only time that I would consider touching my retirement accounts is if I were to buy a house, but even then I would be hesitant to and it will be at least five years before I do that. Thanks again for asking about that.

Edit: before anyone comments about the credit card debt thing, I want to add that I am very fortunate to have a Discover card with a very high credit limit that routinely allows me to take 12 or 18 months zero interest loans for a small fee. That is what I was referring to when I referred to “credit card debt.”

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 5:12 pm

retired@50 wrote:
Sun Mar 22, 2020 2:34 pm
Dolcetto,
It appears as though I'm in the minority. So be it. It isn't the first time, nor will it be the last.

Based on your OP and subsequent remarks, it appears you intend to hold the higher stock allocation for 5 years or so. I hope it works out.

Regards,
Thank you very much for your thoughts. I posted what I did specifically for it to be criticized from multiple angles. You presented very valid points that helped me think more deeply about things. Thanks again.

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by watchnerd » Sun Mar 22, 2020 5:16 pm

Dolcetto wrote:
Sun Mar 22, 2020 12:44 pm


Thoughts? Criticisms? Is this "market timing?"
From a time point of view, you have the ability to take more risk.

But how is the rest of your financial life? What are your debts? Mortgage, rent, own a home? Job situation?
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by FlyingMoose » Sun Mar 22, 2020 5:18 pm

You are comfortable with the current drop, but it is only a 30% drop. The common wisdom is that you should be comfortable with a 50% drop.

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 5:23 pm

FlyingMoose wrote:
Sun Mar 22, 2020 5:18 pm
You are comfortable with the current drop, but it is only a 30% drop. The common wisdom is that you should be comfortable with a 50% drop.
Good question. I’ve imagined that, and I would actually be just fine and happy that I could purchase more stock at an even greater discount. I’ve also imagined me buying stock tomorrow and then next month being out of balance again because of the further stock drop, and again being perfectly happy buying more stock at a discount.

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Thesaints » Sun Mar 22, 2020 5:27 pm

Dolcetto wrote:
Sun Mar 22, 2020 4:59 pm
Thesaints wrote:
Sun Mar 22, 2020 4:31 pm
Dolcetto wrote:
Sun Mar 22, 2020 12:44 pm
Thoughts? Criticisms? Is this "market timing?"
I don’t think you fully appreciate the situation.
Your comment might be helpful if you explain how or why. The other commenters all made what I thought were reasonable and well thought out critiques. Right now, your comment doesn’t add anything to the discussion.
To begin with:
You selected an 80/20 allocation. You thought it might be a smidge too conservative, but when it was time to open the purse you went for a little extra safety.
Now, when market risk is so much higher, you want to go to 90/10.
Clearly, you don't know what you are doing.

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Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 5:39 pm

Thesaints wrote:
Sun Mar 22, 2020 5:27 pm
Dolcetto wrote:
Sun Mar 22, 2020 4:59 pm
Thesaints wrote:
Sun Mar 22, 2020 4:31 pm
Dolcetto wrote:
Sun Mar 22, 2020 12:44 pm
Thoughts? Criticisms? Is this "market timing?"
I don’t think you fully appreciate the situation.
Your comment might be helpful if you explain how or why. The other commenters all made what I thought were reasonable and well thought out critiques. Right now, your comment doesn’t add anything to the discussion.
To begin with:
You selected an 80/20 allocation. You thought it might be a smidge too conservative, but when it was time to open the purse you went for a little extra safety.
Now, when market risk is so much higher, you want to go to 90/10.
Clearly, you don't know what you are doing.
Thank you for your thoughts, but I disagree. I think you were confusing ignorance with being open to changing one’s mind in light of new information. I have new information now. That new information is that I am perfectly happy and comfortable with the drop in my retirement accounts. Given that new information, I thought it is reasonable and prudent to increase my stock allocation, but wanted to have that thought critiqued, which is why I posted here!

If everyone “knew what they were doing” we would have no use for this forum, would we? I thought that’s what this place was about. I thought this place was about people asking questions and others offering their perspectives.

Read through this thread and I’m sure you’ll see that the reason I am thinking about increasing my stock allocation is that I now know I am comfortable with the volatility (new information), and that given my age and retirement horizon a higher equity allocation is reasonable (something that I knew previously).

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by m@ver1ck » Sun Mar 22, 2020 5:41 pm

Given that VBTLX has tonnes of corporate debt, it's really not going to offer much in protection if companies start going belly up. So, why not!
Maybe you'd be better off going from VBTLX to stocks + safer Treasuries to ensure the money is actually safe.

I don't know much about treasuries - but am contemplating something along those lines - need to learn more about treasuries etc. first.

I'm also contemplating going from 77/23 to 80/20, once stocks fall enough to hit 75/25 (5% band, but with 5% measured off-off 80/20). Even stocks fall another 20%, I'll probably going 85/15, and if they fall another 5%, I'll go to 90/10.

On the Non-Taxable side, I'm selling off a bunch of stock at the same time to ensure I have about 100K in cash.

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Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 5:46 pm

m@ver1ck wrote:
Sun Mar 22, 2020 5:41 pm
Given that VBTLX has tonnes of corporate debt, it's really not going to offer much in protection if companies start going belly up. So, why not!
Maybe you'd be better off going from VBTLX to stocks + safer Treasuries to ensure the money is actually safe.

I don't know much about treasuries - but am contemplating something along those lines - need to learn more about treasuries etc. first.
Yeah... I have been meaning to put more thought into my fixed income allocation. That being which funds or funds are used to fill that part of my portfolio. Unfortunately, I’m not really prepared to put in that research at the moment. Please, let me know what you come up with and I will consider it for the future.

Thesaints
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Thesaints » Sun Mar 22, 2020 5:49 pm

Dolcetto wrote:
Sun Mar 22, 2020 5:39 pm
Thank you for your thoughts, but I disagree. I think you were confusing ignorance with being open to changing one’s mind in light of new information. I have new information now. That new information is that I am perfectly happy and comfortable with the drop in my retirement accounts. Given that new information, I thought it is reasonable and prudent to increase my stock allocation, but wanted to have that thought critiqued, which is why I posted here!

If everyone “knew what they were doing” we would have no use for this forum, would we? I thought that’s what this place was about. I thought this place was about people asking questions and others offering their perspectives.

Read through this thread and I’m sure you’ll see that the reason I am thinking about increasing my stock allocation is that I now know I am comfortable with the volatility (new information), and that given my age and retirement horizon a higher equity allocation is reasonable (something that I knew previously).
Yeah, but I prefer to think that your original 80/20 was chosen after a careful evaluation of the projected market volatility, in order to build an AA that suited your financial targets, instead of being chosen rather randomly.
You are saying that you just discovered that your risk tolerance is a little higher. Well, turns out that the projected market volatility is many times higher than we expected. You are not taking on a little more risk than before, you are increasing it by a large factor !

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StormShadow
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by StormShadow » Sun Mar 22, 2020 5:51 pm

Dolcetto wrote:
Sun Mar 22, 2020 12:44 pm
I'm thinking of rebalancing to:

60% - Vanguard Total Stock Market Index (VTSMX/VTSAX)
30% - Vanguard Total International Stock Index (VGTSX/VTIAX)
10% - Vanguard Total Bond Market Index (VBMFX/VBTLX)

Thoughts?
Its aggressive, but since you have such a long period to retire I think its fine.

MnD
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by MnD » Sun Mar 22, 2020 5:56 pm

Vanguard 2050 is 90/10 and if during this time you find you have the capacity and willingness to take on more risk to 90/10, I'd say go for it.
It's not a huge change risk-wise.
But after that, install a rule-based allocation strategy going forward. No more changing allocation based on feelings during times of turmoil.
For example going 90/10 and then mirroring Vanguard 2050's allocation changes.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.

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Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 5:57 pm

Thesaints wrote:
Sun Mar 22, 2020 5:49 pm
Dolcetto wrote:
Sun Mar 22, 2020 5:39 pm
Thank you for your thoughts, but I disagree. I think you were confusing ignorance with being open to changing one’s mind in light of new information. I have new information now. That new information is that I am perfectly happy and comfortable with the drop in my retirement accounts. Given that new information, I thought it is reasonable and prudent to increase my stock allocation, but wanted to have that thought critiqued, which is why I posted here!

If everyone “knew what they were doing” we would have no use for this forum, would we? I thought that’s what this place was about. I thought this place was about people asking questions and others offering their perspectives.

Read through this thread and I’m sure you’ll see that the reason I am thinking about increasing my stock allocation is that I now know I am comfortable with the volatility (new information), and that given my age and retirement horizon a higher equity allocation is reasonable (something that I knew previously).
Yeah, but I prefer to think that your original 80/20 was chosen after a careful evaluation of the projected market volatility, in order to build an AA that suited your financial targets, instead of being chosen rather randomly.
You are saying that you just discovered that your risk tolerance is a little higher. Well, turns out that the projected market volatility is many times higher than we expected. You are not taking on a little more risk than before, you are increasing it by a large factor !
Well, after reading “bogleheads guide to investing“ and looking at what target date funds do, I had decided on 10%. After reading the wiki here and this forum, I was convinced to go 15% and then 20%. My reason was that I was told over and over again that I couldn’t know how I would react in a real crisis. Well, this is a real crisis and I know now that I am perfectly fine. If I were 50 years old, I wouldn’t be, and my allocation then will reflect that. That is the new information that I am now using to go back to my original plan of a 10% bond allocation.

These changes of plan aren’t because “I don’t know what I’m doing” any more or less than anyone else, nor are they because I didn’t put in what I consider adequate time researching given the size of my portfolio. These changes are based on a reassessment of my psychological resilience, given new information.

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Sandtrap
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Sandtrap » Sun Mar 22, 2020 6:00 pm

Dolcetto wrote:
Sun Mar 22, 2020 12:44 pm
I've been managing my investments in a three fund portfolio for about five years. I was in the market for about three years before that holding only a target date fund. The portfolio that I decided upon early on is the following:

50% - Vanguard Total Stock Market Index (VTSMX/VTSAX)
30% - Vanguard Total International Stock Index (VGTSX/VTIAX)
20% - Vanguard Total Bond Market Index (VBMFX/VBTLX)

As the stock markets have fallen recently by almost a third, I've felt no pain or fear about the losses in my retirement accounts. Actually, I'm excited to rebalance on Monday by buying more stocks! I'm in my mid-thirties and have a retirement horizon of 20-30 years. Back when I decided on this allocation, I thought it was a bit conservative, but took to heart advice that said, essentially, that I shouldn't trust myself not to panic if the markets were to fall by a third. Well, they have, and I'm fine.

I'm thinking of rebalancing to:

60% - Vanguard Total Stock Market Index (VTSMX/VTSAX)
30% - Vanguard Total International Stock Index (VGTSX/VTIAX)
10% - Vanguard Total Bond Market Index (VBMFX/VBTLX)

I understand that this also reduces my international/domestic equities ratio, but it maintains round numbers and I'm actually happier with the slightly lower international allocation.

Thoughts? Criticisms? Is this "market timing?"
Consider:
1
This is not market timing if you would have shifted your allocation regardless of current market conditions.
2
However, once learning your risk tolerance, OTOH, re-strategizing to a more aggressive stance from now then going forward is a good move as well.
3
The difference between an 80/20 and 90/10 allocation in the long term and at your investing age is not very great.

Ask yourself, "if the markets fell by 50%, how would you feel about that allocation shift?
Ask yourself, "if the market downturn lasted for over 5 years, how would you feel?

Whether called "market timing" or "restrategizing" doesn't matter. What matters is that you can do the shift and have no regrets n the long run. And, hold true to that course/goal regardless of outside opinion and input and market conditions.

j :D
Wiki Bogleheads Wiki: Everything You Need to Know

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Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 6:03 pm

MnD wrote:
Sun Mar 22, 2020 5:56 pm
Vanguard 2050 is 90/10 and if during this time you find you have the capacity and willingness to take on more risk to 90/10, I'd say go for it.
It's not a huge change risk-wise.
But after that, install a rule-based allocation strategy going forward. No more changing allocation based on feelings during times of turmoil.
For example going 90/10 and then mirroring Vanguard 2050's allocation changes.
Thanks, yeah, as I mentioned previously, my very tentative plan is to move back to 20% when I hit about age 40. I don’t want to muddle this thread and digress into another topic, but sometime in the future I plan to post a thread about changing asset allocation based upon portfolio size instead of based upon age. My point is that I am actively working on a plan. No matter what that plan is, it will be subject to change in light of new information. That is also what I think I am doing here. I don’t think I am being emotional. I think I have been given a test and based on that test I know now know, rationally, that I am more resilient than I thought I would be.

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dottie57 » Sun Mar 22, 2020 6:07 pm

OP, how will you feel Fid it takes 10-15 years to recover. And I doubt we have reached the bottom. Wait until the new tells of 100,000 deaths - bet the market falls a lot then.
Last edited by Dottie57 on Sun Mar 22, 2020 6:08 pm, edited 1 time in total.

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Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 6:09 pm

Sandtrap wrote:
Sun Mar 22, 2020 6:00 pm
Dolcetto wrote:
Sun Mar 22, 2020 12:44 pm
I've been managing my investments in a three fund portfolio for about five years. I was in the market for about three years before that holding only a target date fund. The portfolio that I decided upon early on is the following:

50% - Vanguard Total Stock Market Index (VTSMX/VTSAX)
30% - Vanguard Total International Stock Index (VGTSX/VTIAX)
20% - Vanguard Total Bond Market Index (VBMFX/VBTLX)

As the stock markets have fallen recently by almost a third, I've felt no pain or fear about the losses in my retirement accounts. Actually, I'm excited to rebalance on Monday by buying more stocks! I'm in my mid-thirties and have a retirement horizon of 20-30 years. Back when I decided on this allocation, I thought it was a bit conservative, but took to heart advice that said, essentially, that I shouldn't trust myself not to panic if the markets were to fall by a third. Well, they have, and I'm fine.

I'm thinking of rebalancing to:

60% - Vanguard Total Stock Market Index (VTSMX/VTSAX)
30% - Vanguard Total International Stock Index (VGTSX/VTIAX)
10% - Vanguard Total Bond Market Index (VBMFX/VBTLX)

I understand that this also reduces my international/domestic equities ratio, but it maintains round numbers and I'm actually happier with the slightly lower international allocation.

Thoughts? Criticisms? Is this "market timing?"
Consider:
1
This is not market timing if you would have shifted your allocation regardless of current market conditions.
2
However, once learning your risk tolerance, OTOH, re-strategizing to a more aggressive stance from now then going forward is a good move as well.
3
The difference between an 80/20 and 90/10 allocation in the long term and at your investing age is not very great.

Ask yourself, "if the markets fell by 50%, how would you feel about that allocation shift?
Ask yourself, "if the market downturn lasted for over 5 years, how would you feel?

Whether called "market timing" or "restrategizing" doesn't matter. What matters is that you can do the shift and have no regrets n the long run. And, hold true to that course/goal regardless of outside opinion and input and market conditions.

j :D
Thanks! You’re echoing a lot of white my current thinking is and what many of the other commenters have said. I appreciate it.

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Dolcetto
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Dolcetto » Sun Mar 22, 2020 6:10 pm

Thank you everyone for the excellent discussion. I have attempted to respond to everybody, but probably missed a few. I am going to make the move tomorrow, I have decided. For now, it’s time to watch a movie! I probably won’t be back to discuss more until tomorrow.

Livelife2fullest
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Livelife2fullest » Sun Mar 22, 2020 6:17 pm

IMHO - Soon, perhaps this week, would be an ideal time to re-allocate to a more aggressive portfolio, given your appetite for risk, long time horizon, and the current level of equities.

The key will be to then stick to that allocation. Otherwise, it’s not worth it.

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by watchnerd » Sun Mar 22, 2020 8:06 pm

If you're 90% equities, you might want to consider long Treasuries instead of TBM for that little 10% slide.

I'm only 70% equities and my 15% LTT has been an immense help this crisis.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

FI4LIFE
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by FI4LIFE » Sun Mar 22, 2020 8:26 pm

I think it's fine. I will turn 40 this year and had an 80/20 portfolio coming into this bear market. I'm considering slowly reallocating to 90/10 myself over the next few weeks. I differ from others on this board in that I think these big, bad, bloody drops are great opportunities for some reasonable form of market timing like you are considering. I actually wish I had more appetite for risk in these situations.

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KEotSK66
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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by KEotSK66 » Mon Mar 23, 2020 1:40 am

there's a subset of TSM refered to as value stocks which offer potential earnings opportunities at a discount, is a part of any purchase of TSM considered market timing ?

in the current environment a purchase of TSM could be viewed as a broad basket of opportunities on sale
"i just got fluctuated out of $1,500", jerry

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Re: I feel no fear and no pain. Is now the time to reallocate more toward equity?

Post by Momus » Mon Mar 23, 2020 2:06 am

The bottom isn't here yet. 8-)

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